Gillard Is Gambling With Her Climate Credibility

At her recent National Press Club address, Prime Minister Julia Gillard rationalised Labor’s decision to cut its investment in renewable energy to fund the flood levy on the basis that these policies “are no longer necessary” with a carbon price. Last week, addressing the Committee for Economic Development of Australia, Gillard argued that “a carbon price will drive another sweeping technological revolution like Information Technology did in the 1980s and 90s.”

Both cases reveal that those advising the PM grossly misunderstand climate and energy policy.

Nations with fast-developing renewable energy sectors are using policies like feed-in-tariffs (among other mechanisms) to drive investment. Feed-in-tariffs (FiT) in Spain, for example, have kick-started a domestic solar thermal industry. The Spanish engineering giant SENER has just completed its flagship concentrating solar thermal (CST) plant, and there are another US$20 billion worth of solar thermal projects in the pipeline.

Bizarrely, the Australian Prime Minister thinks that a carbon price alone will drive an economic boom comparable to the IT revolution even though pricing instruments did not kick-start those industries. “We didn’t tax typewriters to get the computer. We didn’t tax telegraphs to get telephones,” the Breakthrough Institute’s Michael Shellenberger is fond of saying. On the contrary, there was a long history of US government investment that helped nurture IT into the profitable sector that it is today.

Matthew Warren, chief executive of the Clean Energy Council, correctly notes that “many of the biggest technological ‘leaps’ forward and infrastructure projects in modern history have been underwritten by government. Typically these are large-scale investments with either big risks or long paybacks – or both.” This is where the Gillard government needs to increase its focus. The government must craft policy that mobilises the investment needed for driving clean technologies down the cost reduction curve. “Relying on a carbon price alone,” warns Warren, “is institutionalising market failure.”

Gillard’s narrow focus on a carbon-price is just the most recent example of a string of clumsy strategies. Since taking over the prime ministership from Kevin Rudd, Gillard announced and killed the ‘cash for clunkers’ program that was estimated to abate carbon at $394 per tonne. The now defunct program won’t be missed. Similarly, the idea of a citizen’s assembly was met with derision before being quietly replaced with the Multi-Party Climate Change Committee thanks to the influence of the Greens. Whether Gillard’s climate policy gaffs were based on poor advice from outgoing chief-of-staff Amanda Lampe or for other reasons, the current government’s approach to the climate crisis to date has been anything but prolific.

It’s clear that PM Gillard has it backwards. She has been led to believe that carbon pricing alone is enough to decarbonise our economy, when in fact, it’s carbon pricing that is the ultimate complementary measure. It will take a range of policies to drive renewable energy deployment, clean technology uptake, and energy efficiency improvements. This is the true consensus.

Gillard’s carbon-price-only position is not only off the mark policy-wise, but out of step with even the most cautious voices in climate policy debates. The hitherto carbon price-focused Climate Institute has changed their tune – perhaps realising the inherent difficulty of explaining emissions trading to the public or the political liability of increasing energy prices. They concede that a carbon price “will not completely replace the need for public investment in developing clean energy technologies,” adding that “… public investments are crucial to develop cleaner energy industries even with a price on pollution” (my emphasis).

Politically speaking, the PM’s decision to abandon public investment also misses the opportunity to rally people who support investment in renewable energy more than carbon pricing. GetUp’s post-election survey showed that 83 per cent of over 33,000 members who participated strongly support investing in renewable energy. Given that renewable energy investment was the top ranked issue out of ten and carbon pricing last, Gillard’s agenda makes for bad politics and bad policy.

Perhaps the twin developments of a new chief of staff for the PM’s office and a new mindset for a conservative climate NGO will mean that the PM moves away from the narrow focus on carbon pricing and develops a sensible climate change policy.

At The Drum, political commentator Annabel Crabb argued that the Prime Minister is betting it all on carbon pricing: “Julia Gillard has reduced her climate task to a single stand-or-fall element. If she succeeds, she’ll be vindicated. And if she fails, it’ll be impossible to disguise.”

Crabb highlights the stakes of Gillard’s gamble with precision. Yet if the PM manages to pass a carbon price will she be vindicated for long? Those attuned to climate policy expect a carbon price ranging between $10 to $20 per tonne — not enough to drive a noticeable shift to renewables, but perhaps enough to usher in an era of (slightly less carbon-intensive) gas power.

How long will it take for pressure to mount on the PM when it becomes apparent to the public that Australia’s energy system has not transformed for the better? If I were a gambling man, I’d put my money on ‘not for long’.